Does TABOR Increase Taxes?
by Ari Armstrong, October 24, 2003
Everybody knows the Taxpayer's Bill of Rights has slowed the growth of government spending in Colorado. Everyone, that is, except Paul Danish, the veteran leftist (but pro-gun) political leader from Boulder County.
In an October 23 article in Colorado Daily, Danish makes an extraordinary argument: "TABOR would make it far easier for California governments at all levels to get more tax revenue -- as it has in Colorado." He adds, "51 percent of the new taxes proposed by the governments at all levels have been approved." For Danish, the advantage of TABOR is that "increases are ear-marked for specific purposes" that voters choose.
It is, of course, difficult to guess what might have happened to tax rates in the absence of TABOR. But, having read Danish's claims, it is no longer immediately obvious to me that the net result of TABOR has been to keep taxes lower. I'm sure others could make that case, though.
Danish has an undeveloped theory for why voters increase taxes more than politicians would: "The voters make the decision in the privacy of a voting booth. Elected officials have to do it with everyone watching." However, if a spending increase is popular, surely a politician would want to publicize his or her action.
I'll add to Danish's argument. Public-choice economists have developed the theory of "concentrated benefits, dispersed costs." For example, a proposal to increase the Westminster sales tax would bring $9.9 million to the police and fire departments in the first year. That's a lot of money. Meanwhile, the costs are dispersed among the residents, at about $93 for every person on average. $93 isn't even enough to encourage most residents to study the issue, let alone campaign against it. (Most residents, even those who vote, have no idea how much the proposal will cost them if it passes.) Meanwhile, I've received a flyer at my door and two mailed, full-color brochures that support the tax increase. Spending tens of thousands of dollars on mailers is a small price to pay for a $9.9 million first-year prize.
Of course, the cost of the new taxes will not be evenly distributed among the residents. Those who pay less in taxes and use more of the services will be more likely to vote for the proposal.
Currently, mostly tax-increase proposals make the ballot. Douglas Bruce, author of TABOR, wants to change that so citizens can send proposals to the city ballot. Right now, though, the city-wide measures are stacked in favor of raising taxes.
In addition, as Jeffrey Friedman has noted, voters tend to be grossly uninformed. Thus, those interested in increasing taxes have become good at snowballing the voters. For instance, the real choice in Westminster is between re-directing existing revenues to police and fire services, and increasing taxes while continuing to spend foolishly in other areas. But of course, that's not the choice presented to voters. Instead, voters are faced with the apparent choice of maintaining the status quo, or increasing taxes for specific purposes. Perhaps Bruce's new effort will help fix this problem.
Austrian economist Hans-Hermann Hoppe argues monarchy is superior to democracy because at least monarchs take a long-term view of the viability of the region. Politicians, by contrast, have an incentive to exploit resources as fast as possible. Arguably, though, legislators face more constraints, and learn more about the issues, than do most voters. Perhaps Danish's argument amounts to the claim that voters cannot face personal consequences for a bad vote, whereas politicians sometimes can.
There might be another element to the claim, too. Many voters have a harder time complaining about a popular vote than about a politician. Perhaps politicians realize they're likely to be scapegoated if they make a difficult decision.
I think the lesson here is that, while specific legal reforms can be helpful in the battle for liberty, those who benefit from government largess are wily. They're highly adept at finding ways to turn the laws to their own purposes, and they have every incentive to do so.